Gov’t To Modify Legislation For Home Buyers’ Insurance

12 May 2015 – Expansión

The Government is going to modify the insurance (legislation) that covers payments made by house buyers against possible breaches by property developers.

The Popular Party has presented an amendment in Congress to the Law for the Regulation and Supervision of Insurance Companies to modify its coverage, which (to date) “has not been sufficient to address the deficiencies that prevent effective protection for buyers, including advanced payments for these purchases”, says the justification for the amendment, signed by the PP.

The governing legislation requires that property developers take out collective insurance policies, through insurance bonds, and then subsequently sign individual policies with (house) purchasers.

But in practice, these second policies are not being signed and the coverage for buyers is not working. Several changes are being introduced “to eliminate this false appearance of insurance”, including the requirement to deposit advanced payments in a special account managed by credit institutions, where the funds may only be allocated to the property developer concerned.

The Law for the Regulation and Supervision of Insurance has completed the first stage of the parliamentary process and has now moved onto the Senate. This law transfers EU legislation (Solvency II) into Spanish legislation and is expected to come into force on 1 January 2016.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Amendment To Insolvency Law Creates “Bonkers Rule”

24 April 2015 – Expansión

The latest amendment to the Spanish Insolvency Act (Royal Decree-Law 11/2014, dated 5 September) has totally changed the rules of the game for investors in distressed debt.

Although it has gone relatively unnoticed amongst other novelties that have grabbed the attention of scholars (such the new cram-down majorities or the special provisions in the transmission of business units), the new rule to calculate the value of securities over the assets of insolvent companies is of great importance for the debt business.

Pursuant to this new rule, securities (basically mortgages and pledges) will no longer cover the initially agreed amounts in insolvency proceedings in those cases in which the receiver’s report had not been issued when the reform entered into force. The “privileged credit” is now capped at the (current) fair value of the collaterals, reduced by 10% to cover foreclosure expenses, minus the amount of any higher-ranking debt.

The new rule, without clear precedents in the main jurisdictions of our legal environment, has been received in some cases with suspicion and in others with shock by top foreign firms with ambitious investment projects in distressed debt. Especially by private equity funds and investment banks having set their sights on portfolios of secured debt owned by financial entities that need to “clean up” their balance sheets and reduce their exposure to the real estate sector (eg. Sareb); transactions that generally have a strong insolvency component. It is also a disincentive for the players of the incipient “direct lending” industry, the most genuine expression of the “shadow banking” phenomenon. These players are thus pushed to request additional guarantees or higher interest rates for refinancing (in a sector with a high cost of capital per se). With financial models ready and binding offers filed, such last-minute surprises are not welcome by potential new lenders. Certain City executives have baptized the amendment as the “bonkers rule” (“regla de locos”), and expressed their wishes for the Government to stop moving the goalposts during the game. As Ignacio Tirado ironized in Expansión (“Trotski y la reforma concursal”, 13 November 2014), it looks like there is a Trotskyist hiding among the Government’s ranks, because of the “permanent revolution” theory being applied to the Insolvency Act.

Leaving the pure economics and irony aside, it is shocking from a legal standpoint that a cornerstone of real estate law such as mortgage liability (with Registry publicity versus third parties) loses all effectiveness upon the filing for insolvency. We are aware that Insolvency Law is a law of exception, which requires a balancing of interests, but we do not believe that choking half a dozen basic tenets of mortgage law for the sake of the utopian “par conditio creditorum” principle (“all creditors should be treated equal”) contributes to enhance payment to creditors, or the continuity of the debtors’ business. On the contrary, it impairs the legitimate expectations of creditors to protect their claims, it contravenes the basic rules of legal certainty (Article 9.3 of the Spanish Constitution) and creates instability by giving rise to interpretative and transitory right issues.

The constant amendments to the Insolvency Law (two on average per year from its entry into force on 1 September 2004), including material changes such as the one we have analyzed, give an image of a fluctuating legal system, always a step behind economic reality, driven by the unchanged and stubborn percentage of companies that end in liquidation. No one has thought that the key could be to facilitate their recapitalization; not to put spokes in the wheels of investors.

Royal Decree-Law 11/2014, together with the so-called “second opportunity law”; RDL 1/2015, are being processed as new draft bills (“proyectos de ley”), so they are subject to new amendments. Maybe it would be a good idea to listen to the market and that legal certainty prevails over a questionable “insolvency justice”. Especially when two core objectives for economic recovery are at stake: attracting foreign capital and cleaning up banks’ balance sheets.

Original story: Expansión (by Antonio García García)

Translation: Dentons

Uncertainty Over Extension Of “Anti-Bankruptcy” Law: RE Firms On Tenterhooks

9 April 2015 – Expansión

The real estate sector is still waiting to see whether Mariano Rajoy’s Government will extend (the term of) Royal Decree Law 10/2008. The legislation has been in place for seven years now, even though it was initially designed to last for only two. The law allows companies to avoid being wound up when the losses they incur result from real estate, real estate investments or stocks.

The Royal Decree was passed to limit the impact of the decrease in the value of real estate assets, which generated millions of euros of losses for many of the key companies in the sector. Therefore, the Government granted them two years to rebalance their accounts and maintain their production activity.

Year after year, first the Government of José Luis Rodríguez Zapatero and then that of Mariano Rajoy, has extended this law. Had it had not done so, several large companies, such as Reyal Urbis and Quabit, would have gone under by now.

Even if the law is not extended (this time around), neither of those two listed real estate companies will be effected (given that the first has already filed for bankruptcy and the second has increased its capital), but many others in the sector will be.

Companies and experts in the real estate sector had assumed that a decision would be announced at the most recent Council of Ministers in March. However, given that no announcement has yet been made, many now believe that it will not be extended.

Last year, the term of the Royal Decree 10/2008 was extended at the beginning of March. Then, CiU used an amendment to a piece of legislation that did not have any clear link to the real estate sector (the bill for the privatisation of the state insurance company Cesce) to make the request for another extension.

The business fabric

Sources close to the Government say that a final decision has not yet been taken. “Activity is now returning to the real estate sector; as such it would be incomprehensible that companies that have survived an unprecedented crisis have to file for liquidation now, just because the Royal Decree Law 10/2008 is not extended for another year. The destruction of the business fabric that took so many years to establish, as well as the job losses, make us think that an extension of the term of the Royal Decree is justified”, says Juan Antonio Gómez Pintado, Chairman of the association of real estate companies in Madrid (Asprima).

Companies in the sector are not the only ones interested in extending the term of the Royal Decree. Wind and photovoltaic companies, affected by cuts in premiums for those types of energy, have also made use of this legislation to avoid being wound up.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Ministry Of Development: House Sales Grew In Every Province In 2014

13 March 2015 – Expansión

More homes were sold in 2014 than in 2013. That is a fact. The question is: how much did the market grow by? The official statistics do not tally (with each other). The Institute for National Statistics (INE) recorded an increase of 2.2% (in 2014), based on data from the property registers. Yesterday, the Ministry of Development revealed an increase of no less than 21.6%, based on data from notaries, which represents the greatest increase since it began publishing these statistics (in 2004), with a total of 365,594 transactions.

This is also the highest figure since 2010, although, of course, it is still a long way from the peak years of the real estate bubble (2007, when 837,483 transactions were recorded). One of the explanations for the disparity in the Government’s statistics stems from the fact that not all transactions recorded in the public registers are included (in the data). Moreover, there is typically a time lag, of a few months, between notarial information and data in the property registers.

In any case, the trend, which is really the important indicator in the real estate market, is becoming bullish once more. Not surprisingly, according to the data from the Ministry of Development, sales of residential properties increased by 2014 in every autonomous region, something that was unheard of in the years of the crisis.

Sales increased by the most in Madrid (44.7%), followed by Navarra (31.3%), Aragón (31.1%), Asturias (30.8%), País Vasco (29.3%) and the Balearic Islands (29.2%).

But the improvement in the market did not stop there. An annual increase was recorded in every single province in 2014. The largest rises were recorded in Ceuta (57.6%), Burgos (46.8%), Salamanca (39.2%), Zaragoza (38.2%), Guadalajara (37.9%), Vizcaya (34.3%), Melilla (34.1%) y Guipúzcoa (33.0%).

Foreigner buyers

House sales to foreigners resident in Spain also experienced a year-on-year increase in the last quarter of 2014, for the fourteenth consecutive quarter, specifically, by 19.7%, with respect to the fourth quarter of 2013, a total of 16,336 sales. Similarly, purchases by non-resident foreigners increased to 1,315 during the quarter, an increase of 13.4% on the previous year.

Overall, sales to foreigners (both resident and non-resident) accounted for 15.8% of all sales. By province, the greatest increases in the number of purchases by foreign residents were recorded in Alicante (3,852), Málaga (2,226), Barcelona (1,536), Madrid (1,285) and Baleares (1,126).

Finally, it is worth noting the healthy level of activity in the housing market in the fourth quarter of 2014, when 111,921 homes were sold in Spain. Not since 2010 have more transactions been recorded during the fourth quarter (150,494). This figure represents a year-on-year increase of 19.5%.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

The Number Of People Out Of Work Fell By 13,528 In February

4 March 2015 – El Mundo

The construction and industrial sectors were the main drivers behind job creation, once again.

The labour market offered a breath of fresh air yesterday, after starting the year on a bad note. The number of people out of work decreased by 13,538 in February, the largest drop in this month for 14 years; and the number of people registered with Social Security increased by 96,909, the best figure in this month since 2007, according to the Ministry for Employment. The construction and industrial sectors were the main drivers behind job creation.

Traditionally, February tends to be a strange month for employment, with highs and lows, and since 2008, when we began to feel the first effects of the crisis, unemployment has always increased in this month, except for last year when the figures decreased by 1,949 people. This year, the number of unemployed people decreased by 13,538 in February. Despite this decrease, the number of people out of work in Spain is still worryingly high, with more than 4,512,123 people registered with the Public Employment Services (formerly Inem). This figure is even higher than the one Mariano Rajoy inherited when he arrived at La Moncloa for the first time.

By sector, unemployment increased in the agriculture sector only in February (by 467 people), whilst it decreased in construction (10,091), industry (6,535) and the service sector (233).

In light of this data, the Government is optimistic and confident that it will achieve its objective of creating three million new jobs by 2019. Currently, the total number of people in paid work amounts to 16,672,222.

The increase of almost 100,000 new taxpayers in February partly offset the significant decrease in the number of jobs in January, when the number of taxpayers decreased by 200,000, following the end of the Christmas season.

By sector, construction – one of the hardest hit by the crisis – was where the most jobs were created (26,968), together with industry (15,097). Meanwhile, the service sector registered 61,842 more taxpayers, thanks to boosts from education (16,203) and hospitality (14,012).

However, the resurgence in the construction sector concerns the opposition party and the trade unions. The PSOE’s (Shadow) Secretary of State for Employment, Luz Rodríguez, says “the return to property could mean that we exit the crisis through the same door that we entered it”.

In terms of the number of contracts, 1,226,950 contracts were registered in February, up 12.5% compared with the same month last year. Nevertheless, the majority (more than 90%) were still temporary. Only 120,181 contracts were permanent, equivalent to 9.8% of the total number. Nevertheless, the Ministry for Employment highlighted that these figures are 23% higher than in January last year.

In terms of the number of hours worked, 71,754 of the permanent contracts were for full-time positions (16,804 more than in the previous year, an increase of 30.58%) and 48,527 were part-time (5,673 more than in February 2014, an increase of 13.24%).

However, these figures are not good enough for the trade unions UGT and CCOO, which report that the jobs that are being created are “precarious” and “low quality” and that the wages are “clearly insufficient”. Moreover, they point out that the inequalities between men and women are increasing and that young people are being left behind. Thus, whilst the unemployment rate decreased for men in February (with 19,587 fewer unemployed men than in January), they increased for women (with 6,319 more unemployed women), taking the total number of unemployed men and women to 2,117,980 and 2,394,173, respectively.

Furthermore, the number of unemployed young people under the aged of 25 increased by 2,569, and the number of foreign unemployed people increased by 3,030. In the opinion of the USO trade union, these figures show that “the recovery in terms of unemployment is not on the right track”.

By autonomous region, Madrid was the community where unemployment increased the most in the month of February, by 2,411 people to be exact; followed by Andalucía, with 2,121 more unemployed people and Castilla-La Mancha with 139. Meanwhile, unemployment decreased in 14 autonomous communities.

In terms of the coverage rate, i.e. the percentage of unemployed people that receive benefits or allowances, it continued to decrease in an alarming way.

During the month of January – the latest month for which data is available – it amounted to 56.49%, i.e. five points lower than in the same month in 2013. This means that almost one in every two unemployed people registered with the former Inem, does not receive any kind of financial aid. Moreover, total spending on benefits amounted to €1,962 million in January, which represented a 17.7% decrease compared with the same month last year.

Original story: El Mundo (by Isabel Munera)

Translation: Carmel Drake

Madrid To Build A Conference Centre & Luxury Hotel Opposite The Bernabeu

19 February 2015 – Expansión

The Town Hall will approve the operation of a conference centre and the construction of a five star hotel in exchange from the renovation of the complex, which will also include a retail area.

It is one of the most iconic buildings in Madrid’s financial district, in particular due to the mural on its facade, designed by the artist Joan Miró.

Built in the 1960s and located on the Paseo de la Castellana, opposite the Santiago Bernabéu stadium, Madrid’s Conference Centre (Palacio de Congresos) has been closed for two years due to the poor state of its facilities, which violate basic safety standards.

But today, the Town Hall expects to approve a plan for the comprehensive remodelling of the site and in addition, to construct a luxury hotel that could have up to 23 floors.

According to sources close to the transaction, the Town Hall will invite tenders for the renovation of the Palacio and the construction of a hotel that do not result in any cost to the taxpayer: the successful bidder will complete the building work, estimated to amount to €86 million, in exchange for a licence to operate the entire complex.

In other words, the management of the Palacio and hotel will be in private hands, but ownership of the space will continue to remain with the public. “The role of the State should be to promote different types of tourism, but given the quantity of highly prestigious tour operators in our country, the best option is for them to take care of the management to ensure we provide state-of-the-art facilities”, explained an internal document about the operation.

Both the Town Hall and the Ministry of Industry, Energy and Tourism, have been very involved in the process. They want the new Palacio to be an engine for attracting “sophisticated, profitable” tourists with “higher added value and greater spending power”, which is why one of the requirements of the tender is that the hotel be a five star facility, “capable of meeting the highly specialised demand for conferences and meetings”, said the document.

In theory, the Government will oversee the aesthetics and architectural modelling of the project, which will not affect the Miró mural under any circumstances. The halls in the new building, designed especially to host professional conferences and large events, must have the latest technology and the best audiovisual facilities and scenography. Similarly, the new complex will have to provide a catering service for at least 1,800 diners.

The current surface area of the Palacio is 40,000 square metres, although since the partial remodelling plan approved in 2001, it has been allowed to increase that to 47,000 sqm; additional space that could be used to build the hotel. Moreover, the space available to construct “compatible” businesses (shops, high-end boutiques, travel agencies, etc.) will increase from 25% of the current total surface area up to 35%. The only business that the tender excludes from being housed in this space are large superstores, reflecting its goal of ensuring that the Palacio does not become a kind of shopping centre. “Other compatible uses will be permitted, but the main use will continue to be as a conference centre”, says the report.

Original story: Expansión (by Yago González)

Translation: Carmel Drake

The Spanish Government Owns Over 12.000 Properties

12/12/2014 – Pisos.com

Creation of a transparency web site (www.transparencia.gob.es) gives any citizen an access to information about the properties in hands of the Public Administration. Governmental Real Estate totals at 12.038 units, with the Ministry of Public Works owning 2.831 properties, and the Ministry of Internal Affairs disposing of 2.721.

It appears that among the units belonging to the Public Works there are buildings of port authorities in various provinces of Spain. There are also headquarters of Guardia Civil (Spanish military police, one of the buildings pictured) and some police properties of the Home Office. Among the real estate of Defence, noteworthy are the Housing and Infrastructure Departments and its equipment storage buildings, all amassing to 1.925 units. Finally, when it comes to the Agriculture, Food and Environment, the Ministry owns 1.844 properties.

 

Original story: Pisos.com

Translation: AURA REE